The managers of a canola processor and biodiesel producer in Washington state want to liquidate the company over the objections of creditors.

According to court documents, Inland Empire Oilseeds of Odessa, Wash., is seeking to sell the firm's assets under a Chapter 7 bankruptcy.

Its creditors had previously filed a petition to force the company into Chapter 11 bankruptcy, which would allow it to operate while developing a restructuring and debt repayment plan.

However, the company's management has asked a bankruptcy judge to convert the case to a Chapter 7 liquidation because it "does not have the financial ability to reorganize," according to the documents, which were filed in bankruptcy court for Eastern District of Washington.

Because Inland Empire Oilseeds has defaulted on its rent, it now also owes more than $2.6 million in back payments, according to a court document. The company has laid off two-thirds of its 30 employees because it was unable to make payroll.

Washington's Department of Ecology is rescinding a permit needed to keep running the plant, the document said. The facility has also canceled registration with the U.S. Environmental Protection Agency that allows it to generate renewable fuel credits, the document said.

Capital Press was unable to reach Inland Empire Oilseeds for comment.

Creditors have filed an objection against converting the case to a Chapter 7 liquidation, arguing that the company's managers have "not set forth sufficient cause" and have "not established that such a conversion is in the best interest of creditors."

Inland Empire Oilseeds faced broader economic problems that confront the biodiesel industry in the region, according to some experts who tracked the company.

Canola produced in Washington isn't as reliable a raw material as crops with a longer growing season in equatorial regions, like oil palms, said Bill Riley, former member of the Big Bend Economic Development Council.

That's particularly true since farmers in the region are benefiting from historically high prices for wheat -- a crop that's seen as less risky, he said. "They've got a ready worldwide market for grain."

With the bankruptcy of Inland Empire Oilseeds, farmers will probably be even more cautious of producing the crop, Riley said. "That's going to send a chill through anyone thinking about growing canola."

It's unlikely there will be many eager buyers for the oilseed crushing and fuel production equipment, so the company will probably be lucky to liquidate its assets for 25 cents on the dollar, he said.

"It's a devastating event," Riley said. "These jobs were important to the community."

The plant needed roughly 30,000 tons of canola to operate at full capacity, while only about 9,000 to 12,000 tons are produced in Washington annually, said Roger Krug, economic development director for nearby Adams County.

Prices for diesel haven't been high enough to justify higher prices for canola, particularly since spring frosts in the region can seriously hinder production of the crop, Krug said. Hauling oilseeds in from more distant areas also wouldn't be efficient.